Practically every company on the planet sets out with the primary objective of earning money. This is generally done by producing some form of product, or offering a service, and then charging customers money for it. This fundamental theory is fairly straight-forward, though it contains many intricate details.
Firstly, it is a very rare case that a business can offer a product or service that is truly unique and cannot be provided by anyone else. This means that your business will be competing with other businesses that sell a similar item and you will both be trying to earn money from the same shoppers, who only want to spend their money once.
Marketing is the main tool used by modern organisations to draw potential customers to do business with them and not with their rivals. It is a very broad topic that is affected by a great deal of internal and external variables, but when done right it can be the one business practise that can make or break a company. Any time spent on marketing will reap benefits, although spending this time efficiently can yield extraordinary results.
So where should you begin when creating a marketing strategy for your own business? Well, every situation is different, and every business will have its own set of advantages and weak points that must be taken into consideration, but there is a marketing principle that can be applied to almost any company to be used as a marketing platform.
The Marketing Mix
The marketing mix was a phrase that was first coined during the 1950’s and is a phrase that is used to describe the fundamental building blocks of any marketing strategy. It reflects the fact that marketing is not a simple, blunt-edged business technique, but rather a subtle balance of different aspects of business operations. It got its name since it is similar to the ingredients list for a recipe.
The term was later built upon to include the concept of “four P’s” that described the critical elements of the marketing mix. The formalisation of these P’s made it very clear for company managers and marketers to swiftly associate the elements of marketing to the strengths of their own companies, and by doing so could very quickly form a customised and effective marketing plan.
The “product” aspect of the four P’s could pertain to any product, such as resin flooring, or even any kind of intangible service being provided for sale by a company.
Product
Whilst every element of the marketing mix is a requirement, the “product” element mentioned as one of the four P’s is perhaps the most crucial of all. It identifies the physical product or intangible service that your business will be offering, and at the end of the day it is the reason that customers are going to spend money with you.
Many people do not think that marketing has any role to play when it comes to the physical product that your business is selling. In fact, the common train of thought very often bears the exact opposite sentiment. Surely it should be the opposite way around – your production department creates an item for sale and then it is the job of the marketing department to find ways to sell it, right?
Consider the computer software market as an example. There are many established brands of both operating system as well as software application products on the marketplace already, and because the market is relatively well saturated it would be very tough (and expensive) to “take on the big boys”. So how could the principles of the marketing mix assist in this situation?
Rather than creating an operating system and then attempting to craft a marketing strategy to rival the likes of Microsoft and Apple, it would be more effective to look at what types of product are desired in the current marketplace, and how feasible it would be to produce and sell them.
Once your goods have been designed and created it is still a critical skill to be able to objectively review your own products to identify the reasons that a customer should buy your product rather than a competitors’. The technique is called product differentiation and forms one of the fundamental skills of the product part of the marketing mix cake.
A different form of this part of the marketing mix is known as product variation and is typically used to either lengthen the lifecycle of a product already in the market, or to make your brand new product attractive to as many consumers as possible. Again, this technique can be applied at all stages of product development.
The car industry uses this approach very effectively by offering different engines, trim packages and interior options with the cars that they sell. They use the marketing mix to great effect to sell their own products in an incredibly competitive marketplace. Although these companies may have substantial marketing budgets, the same principles can be applied to all businesses.
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Price
Another important factor in the marketing mix relates to the price of your products or services. This isn’t a simple case of performing market research to figure out the top price that your customers would pay (although that can be a useful tool to use), but rather making use of the price of your products as a strategic weapon designed to achieve any specific objectives your business has. The potential benefits of an effective pricing strategy are surprisingly large!
Whilst it may seem obvious, it is still worth noting that price has always been, and likely always will be, one of the key factors that customers take into account when they are making a purchase. It is also worth noting that customers do not always consider the cheapest price to be the best value.
There are many questions that you need to ask yourself when devising a good pricing plan, key amongst which are the price sensitivity of your customers, what your competitors are doing and how can pricing boost your own profits. From a strategy point of view though, pricing can be covered by two main principals; price skimming and penetration pricing.
Price skimming
The main idea behind price skimming is to make as much cash as possible from the segment of the market which is price-insensitive and are going to be prepared to spend a large amount of money to get a product or service early on. Not only can this approach deliver great financial advantages, but it can also promote an exclusive and high quality image of your item.
This pricing strategy is very often used in the consumer electronics industry where customers will often eagerly await the launch of a new mobile phone or computer games console. Manufacturers could set nearly any price they wanted to and there would still be a loyal base of customers that would pay it. By using this method as part of a pre-ordering strategy, a firm can help to smooth its own money flow.
Penetration pricing
Penetration pricing is at the opposite end of the pricing spectrum, and is tailored towards gaining a large market share at a short-term cost so that financial benefits can be made long into the future. It can be a risky strategy, but when used correctly it can setup revenue streams for many years to come. When setting a price for penetration it is still essential to not give a bad impression of your product by aiming for too low a figure.
Yet another thing to keep in mind is that “price” is the one part of the marketing mix that will generate earnings for a business. The other members of the four P’s will all cost money to create or undertake.
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Place
Place is the component of the marketing mix that is often overlooked by companies, but it is still an important part of selling your product successfully. In short, it describes the method in which you provide your product to your customer, and consequently how you collect money from them.
The most typical implications of place-based marketing are the physical locations in which your products are sold. For the majority of consumer products, this involves the distribution network between your production plants and retailers and other outlets around the world. Since distribution of a physical product costs money it is crucial to determine your own priorities and adapt your distribution network appropriately. This is the main use of this element of the marketing mix.
With the increasing use of the Internet by your potential customers, marketing strategies have had to take into account how they use the Internet to help deliver their products. By using the Internet as a point of contact (or even as a whole distribution route in download-based markets such as MP3s) companies are now able to reach out to a huge pool of potential customers.
Promotion
When you say the word “marketing”, most people instantly think of the promotional side of the marketing mix, although as we have seen, this is only one branch of a more complete system. Promotion can be used on a very individual basis or as a mass communication tool, and whilst it can be an expensive undertaking it is often an important one. The key concern of promotion is to deliver a certain message that will boost sales.
Advertising is one of the most typical forms of promotion. Typically it would be done by posting on billboards, producing short clips for TV and radio or by physically handing out flyers or leaflets to potential customers. With the coming of the information age we have seen a great increase in promotion via e-mail and the Internet, or simply as targeted advertising material posted through your door.
Another significant part of promotion involves branding, which will not necessarily yield more sales directly, but goes back to one of the initial functions of marketing; getting customers to choose your product over those of your competitors. When all other pieces of the marketing mix are equal it can be branding that sways a customer’s choice.
Putting it into Practise
As previously mentioned each company is unique and will have different marketing requirements. By using a balance of the four P’s reviewed above you can take a good view of your own marketing plan.